Air India Divesture Faces Headwinds

Amid rumors that the Indian government of Narendra Modi is apparently considering relaxing the deadline for submitting an expression of interest to buy 76% in state-owned carrier Air
India, Jet Airways earlier this week ruled out a bid for the debt-laden carrier, which the government put up for sale in March.

Air India’s divestment plans face strong headwinds

Another Indian carrier backs out
The move comes four days after India’s low cost carrier IndiGo announced its decision to back out of bidding. “The company examined the possibility of taking over the struggling national carrier,
but had decided not to do so. Considering the terms of the offer in the information memorandum and based on our review, we are not participating in the process,“ Jet Airways deputy chief
executive officer Amit Agarwal told the Financial Times.
Jet Airways along with Air France-KLM and Delta Airlines showed interest in participating in Air India disinvestment, people in the know told the Press Trust of India last month. Further
dampening the government’s efforts to privatise the loss-making debt-ridden airline, Reuters reported on Wednesday that India’s steel-to-autos conglomerate Tata Group, widely seen as a potential
suitor for Air India, is unlikely to consider a bid for the state-run carrier as the government’s terms are just too onerous, two sources familiar with the matter were quoted as saying. One of
the sources, who asked not to be identified due to the sensitivity of the matter, said that Tata Group, which already owns stakes in two airline joint-ventures in India, does not see “how a deal
would be workable“ under the current terms.

Government held stake seen as a drawback for bidders
The Reuters report noted that the government has stipulated the winning bidder cannot merge the airline with existing businesses as long as the government holds a stake.
The winner may also be required to list Air India and would need to abide by conditions designed to safeguard employee interests, restricting its ability to cut staff. Since the terms were
disclosed, no company has come forward to say it is interested or to reaffirm previous interest, the report said.
In January, Leslie Thng, the chief executive of Vistara, a joint-venture between Tata and Singapore Airlines told reporters its owners were open to evaluating a bid for Air India. Vistara
declined to comment and Singapore Airlines had no immediate comment last Wednesday. Unless the government radically changes the current terms to make them more palatable for potential bidders,
the latest developments could mean prime minister Modi may have to abandon the divestment plans for Air India.